&Acirc;&pound;13bn RAF tanker deal delayed a year

A £13bn deal to provide the RAF with a new fleet of air-to-air refuelling tankers is now running a year late, one of the leading contractors on the project disclosed yesterday.

A £13bn deal to provide the RAF with a new fleet of air-to-air refuelling tankers is now running a year late, one of the leading contractors on the project disclosed yesterday.

The aerospace group Cobham, which owns a 20 per cent stake in the Air Tanker consortium, said that a contract was not likely to be signed with the Ministry of Defence until the end of next year.

Air Tanker, which was originally selected for the contract in January, in preference to a consortium led by Boeing, had expected to agree terms with the MoD by the end of this year. Gordon Page, the chairman of both Cobham and Air Tanker, said the delay meant that the fleet of 17 Airbus A330 refuelling aircraft would not now come into service until 2008.

Mr Page said the delays had been caused by the insistence of the MoD and the Treasury that the maximum amount of risk be transferred to the private sector. The 27-year deal is being funded through the Government's private finance initiative and relies upon the Air Tanker consortium generating commercial revenues from the refuelling aircraft when they are not in use with the RAF.

Mr Page said he was hopeful that Air Tanker would be named as the MoD's preferred bidder by the end of this year, paving the way for the deal to go ahead under the PFI. He dismissed suggestions that the MoD might still opt to fund the purchase of the aircraft itself, saying it did not have enough money in its budget.

He was speaking as Cobham reported an 11 per cent increase in pre-tax profits to £51.8m for the first half of the year and predicted a big increase in its presence in the market in the United States. Cobham expects the US to account for about half its sales within the next two to three years compared with one-third at present.

The increase in US revenues will be driven in part by the huge rise in American spending on homeland security. Cobham is part of a consortium including BAE Systems, Honeywell and American Airlines which is developing measures to enable passenger aircraft to detect and combat shoulder-launched air-to-air missiles. Cobham will provide the pod which houses the sophisticated electronic tracking equipment.

Revenues were up by 20 per cent in the six-month period to £461m and the order book rose to £1.3bn. Cobham also said there were signs of growth in the civil aircraft market.